Canadian investors are using their self-directed Tax-Free Savings Account (TFSA) to build portfolios of investments to meet financial goals. Retirees can take advantage of the tax-free rules of the TFSA to generate income that won’t put their OAS at risk of a clawback. Younger investors might decide to harness the power of compounding to reinvest dividends in new shares to build wealth.
In the current market conditions, with the TSX hitting record highs and economic uncertainty on the horizon, it makes sense for investors to search for stocks that have long track records of delivering dividend growth through the full economic cycle.
Fortis
Fortis (TSX:FTS) is a good example of a stock that investors should consider for its dividend growth outlook, rather than the yield. The board has increased the dividend annually for the past 51 years and intends to boost the distribution by 4% to 6% per year through at least 2029. This is solid guidance in challenging economic times when tariffs and geopolitical tensions risk disrupting global financial markets.
Fortis owns natural gas utilities, power generation facilities, and electric transmission networks. Businesses and households need to use natural gas and electricity regardless of the state of the economy. Nearly all of the revenue generated by the assets is rate-regulated, meaning cash flow should be predictable and reliable.
Fortis has a $26 billion capital program on the go that will raise the rate base from $39 billion in 2024 to $53 billion in 2029. The boost to earnings as the new assets go into service should support planned dividend growth. Fortis is considering other projects that could be added to the capital program. The company also has a good track record of making strategic acquisitions to drive growth.
Investors who buy FTS stock at the current price can get a dividend yield of 3.7%.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) trades close to $43 per share at the time of writing, compared to as high as $55 in 2024. The decline in the stock price over the past year is primarily due to lower oil prices. West Texas Intermediate (WTI) oil trades for close to US$66 per barrel right now. A year ago, it was above US$75.
CNRL says its break-even WTI price is in the US$40 to US$45 range, so the business remains very profitable with oil at the current level. The company has a wide variety of oil assets, including oil sands, conventional heavy oil, conventional light oil, and offshore oil. CNRL is also a major natural gas producer. Natural gas prices are off the 2025 high, but remain above the pricing traders saw in most of 2023 and 2024.
The diversified product portfolio, efficient operations, and a strong balance sheet are the reasons CNRL has been able to increase the dividend annually for the past 25 years. Investors who buy CNQ stock at the current price can get a dividend yield of 5.5%.
The bottom line on top TSX income stocks
Fortis and CNRL pay solid dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA, these stocks deserve to be on your radar.
